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More than 2,500 lobbyists spent $500 million to try to defeat the law. Despite the financial sector’s huge expenditures, the Wall Street reform law is an important first step in reining in excessive financial practices.

The law contains stronger consumer financial protections and curbs on some of the worst practices in the derivatives markets, reports Public Citizen, a consumer advocacy organization. It includes:

Consumer protection

The law consolidates and streamlines existing consumer financial protection by creating a Consumer Financial Protection Bureau. The bureau will have the authority to crack down on unfair, deceptive, and abusive practices in connection with consumer products such as payday loans, credit cards, and mortgages by using new rules and enforcement powers. It also will have authority to ban harmful practices such as forced arbitration.

Transparency, oversight, and stability in the over-the-counter derivatives market

The law also makes major progress on reining in reckless and unfair derivatives practices. It restricts the worst practices, such as federally insured banks engaging in risky proprietary trading and financial institutions making bets against their own clients. It requires the majority of unregulated OTC derivatives to be cleared and traded on regulated exchanges. Derivatives were a critical cause of the financial crisis; new clearing and exchange rules should go a long way toward stabilizing the system.

Public Citizen is concerned that other positive parts of the law may not be carried out if Wall Street regains control of the regulatory process.

In addition, many important reforms are missing from the law, according to the organization. Some key elements were eliminated or weakened in the conference committee. These include limits on commercial banks owning hedge funds and many of the requirements that commercial banks spin off their derivatives trading desks.

Other key reforms are absent from the law, Public Citizen reports. They include meaningful restraints on executive and top trader compensation, a financial speculation tax, and rules to break up the biggest banks. The huge banks that now dominate the financial sector – which is more concentrated than at the beginning of the financial crisis – pose a continuing threat to the economy and democracy, according to Public Citizen.

Because it doesn’t break up huge banks, the law doesn’t ensure that the nation won’t have a repeat of the financial crisis, says the organization. Another round of reform will be needed to achieve that objective.

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate..